Zee Entertainment Enterprise Limited on October 2 moved the Bombay High Court against its biggest shareholders Invesco and OFI Global China Fund, saying their demand to call an extraordinary general meeting (EGM) be declared illegal.
The move comes a day after the company rejected the demand for EGM, which is being sought to overhaul the board and also seek the removal of managing director Punit Goenka.
“This is to inform you that the Company has filed a suit before the Hon'ble High Court of Judicature at Bombay (Bombay High Court) under the ordinary original civil jurisdiction (Civil Suit), inter alia requesting the Bombay High Court to declare that the requisition notice sent to the Company by Invesco Developing Markets Fund and OFI Global China Fund LLC (shareholders of the Company) is illegal and invalid,” Zee said in an exchange filing on October 2.
Invesco and OFI Global China Fund LLC, which together hold a 17.88 percent stake in Zee Entertainment, demanded an EGM in a letter on September 11. Apart from the ouster of Goenka and two other directors, Invesco sought the appointment of six new directors—Surendra Singh Sirohi, Naina Krishna Murthy, Rohan Dhamija, Aruna Sharma, Srinivasa Rao Addepalli, and Gaurav Mehta.
Also read: Explained: Why has the Zee board rejected the Invesco EGM demand?
On September 29, a week after Zee announced the mega merger with Sony Pictures Networks India (SPNI), Invesco moved the National Company Law Tribunal (NCLT) seeking an order for an EGM to be convened.
The NCLT, which listed the matter for a hearing on October 4, asked the board of Zee to consider the requisition made by the investors.
"In the best interests of the company as a whole, including all its shareholders and stakeholders, we express our inability to convene the EGM," Zee said on October 1.
The company claimed that it arrived at the conclusion after consulting legal experts, including former Supreme Court judges.
Also read: Invesco's purpose unclear, say proxy advisory firms on US Fund moving NCLT against Zee
Zee said Invesco had called the EGM to push for the ouster of Ashok Kurien, Manish Chokhani and Goenka. However, Kurien and Chokhani had already resigned, thereby making the resolution moved by Invesco "infructuous".
"The board deliberated, and unanimously concluded that the requisition notice is not valid, as it suffers from multiples legal infirmities," the company said.
Why Zee moved court?
Sources with direct knowledge of the development told Moneycontrol that the Zee board decided that the requisition for an EGM by Invesco and OFI Global China Fund was not valid due to non-compliance with various laws and advised the company to file a declaratory suit in a civil court to confirm the invalidity.
Several statutes of the matter were outside the purview of the Company Law and didn’t fall under the jurisdiction of the NCLT where the matter was sub judice, legal sources said.
Zee would argue Section 98 of the Companies Act in the NCLT hearing on October 4, sources said. The section allows NCLT to suo motu hold EGM if impracticable by the company, while Zee’s argument is that the requisition itself is invalid.
In this protracted legal battle, more frontiers have opened and fireworks cannot be ruled out as Zee and Invesco come face to face in the court of law.
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